Non-major lenders could become first port of call for mortgages

An ongoing shift in the Australian lending market could see smaller lenders become a more popular destination for people looking for mortgages according to one financial analyst.

Martin North, the principal of Digital Finance Analytics, believes changes made by Australia’s big banks in response to the Australian Prudential Regulation Authority’s (APRA) push to cool investor lending and changes to the capital requirements they need to hold against their mortgage books will see more people turn to non-major lenders.

Going forward, north believes lender such as Australia’s big four banks will have a reduced appetite for the risk they carry on their mortgage books and as a result smaller lenders will become more prominent in the mortgage market.

“As the big banks respond to the capital adjustments I think it’s going to be harder to get a loan, harder to get an interest only loan and harder to get a high LVR,” North said.

“As a result, I think the non-banks and smaller lenders are going to become more popular and more pro-active as the availability of loans at the major lenders is reduced.”

North’s predictions may be already occurring as well, with HSBC announcing this week it will only offer investment loans to existing customers.

HSBC's Australian head of retail banking and wealth management Graham Heunis said the bank was taking steps to meet its regulatory requirements.

“These mechanisms include limiting investor home loans to existing customers only, as well as providing owner occupier customers with a highly competitive variable rate.”

That occurred in the same week that non-bank lender Mortgage Ezy announced mortgage packages that could see home loans with interest rates below 3%.

Under the Reduce Home Loan Combo, customers of the non-bank will be offered owner occupier home loans with interest rates as low as 2.5% if they settle an investment loan with the lender.

The interest rate of an investment loan with Mortgage Ezy under the plan would be tied to an average rate of the big four’s standard variable rate for investments loans at the time the loan is written.